Germany softened its resistance to a third bailout package for Greece on Wednesday, raising the chances that a draft plan could be approved in time for the country to make a crucial debt payment next week.
While a political obstacle course still lies ahead, Eurozone finance ministers scheduled a meeting on Friday in Brussels at which they could give their imprimatur to the bailout deal.
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The German government gave an explicit, if cautious, welcome to a draft agreement reached on Tuesday, which would grant Greece as much as euro 86 billion, or about $95 billion, in return for strict spending limits and other conditions.
The bailout requires approval from parliaments in Germany, Greece and other countries before August 20, when Greece must repay €3.2 billion it owes the European Central Bank. The plan has stirred significant opposition in German Chancellor Angela Merkel's conservative bloc, and Merkel and other senior government members have taken pains to cast themselves as careful stewards of public money. That stance made Wednesday's cautious welcome to the Greek plan all the more significant.
In Athens, the Greek Prime Minister, Alexis Tsipras, faced resistance to the deal in parliament, which would need to approve 200 pages of legislation by Friday to qualify for the aid. But Tsipras said on Wednesday that he was confident the deal would be approved in time.
To qualify for its third bailout in five years, Greece must agree to sweeping changes to the way it manages its economy. Among other things, the draft agreement reached on Tuesday requires Greece to overhaul tax collection procedures, deregulate the natural gas market and change foreclosure laws.
Given the brinkmanship and ill will that had characterised relations between Greece and its eurozone creditors, particularly Germany, the new mood seemed almost jarringly upbeat. But Greece has accepted almost all of the creditors' demands, making it difficult for Germany to obstruct the deal. The questions ahead include whether the government of Greece can carry out the changes it is promising - assuming the country's lawmakers vote to embrace them and the Greek people cooperate.
The draft agreement with eurozone countries includes 29 pages of details about how Greece should modernise its economy and its public administration, for example by curtailing early retirement, giving businesses more freedom, privatising state-owned industries like railroads and airports, and fighting corruption.
While many economists see the changes as necessary, many Greeks resent what they see as micromanagement of their economy by outsiders. For example, the plan contains detailed instructions on how Greece should change its foreclosure laws to make it easier for banks to collect unpaid debts. More than a third of Greek loans are classified as non-performing, a serious threat to the banking system.
And many experts say the plan is predicated on an unrealistically speedy turnaround in the Greek economy. After shrinking 2.3 per cent this year and 1.3 per cent in 2016, according to the plan's forecasts, the Greek economy is supposed to rebound sharply, rising 2.7 per cent in 2017 and 3.1 per cent in 2018.
"I am a little bit stunned because those numbers have no relationship to reality," said Ashoka Mody, a former economist at the International Monetary Fund (IMF) who is now a professor at Princeton University.
The authorities in Brussels have battled a perception, particularly strong among some German legislators, that the deal reached with Greece this week was done too hastily. On Wednesday, though, Merkel's spokesman, Steffen Seibert, was less critical than German officials had been earlier in the week. "If you consider where we've come over the past months in this discussion, this is a substantial result," he said. "It is true that the Greek government was constructive and results-oriented in its discussions with the institutions. Negotiations took place in an atmosphere that we hadn't experienced in the past months."
A crucial issue is whether the terms of the agreement will allow participation of the IMF in the early stages of the bailout.
The fund, another of Greece's creditors, participated in drafting the agreement reached with Athens on Tuesday. But the IMF has said it will not take part in any programme that does not include debt relief for Greece. That is a potential sticking point, because the German government and others want to ensure that Greece starts living up to its promises before offering longer maturities or reduced interest rates to ease its debt burden.
The Greek government owes more than €315 billion, mostly to other eurozone countries. But it still owes the IMF €20 billion, and the new programme assumes Greece might borrow still more from the fund.
Germany has not ruled out giving Greece years, if not decades, to repay its loans, which could satisfy the IMF.
Jean-Claude Juncker, the president of the European Commission, held separate telephone calls with French President François Hollande and Merkel on Wednesday about the deal. In addition, officials from the finance ministries of the 28 European Union member states planned to talk by phone Wednesday evening on the bailout plan.
A spokesperson for the German finance ministry, Jürg Weissgerber, said on Wednesday that Berlin was awaiting important figures and exact details on the size of the proposed package. He insisted the idea of temporary financing remained an option if there was no agreement on the new bailout in time for Athens to make the August 20 payment to the European Central Bank.
Last month, Merkel faced open rebellion from 60 deputies in her centre-right bloc when the Bundestag voted to approve opening negotiations with Greece. And exchanges among conservative lawmakers this week have suggested that the opposition to giving more money to Greece may have grown in the interim.
Merkel can rely on the Social Democrats, partners in her coalition government, to ensure parliamentary approval. But in Germany's consensus-minded political system, a rebellion against the authority of a chancellor is unusual, and thus significant.
As is her custom, Merkel has returned quietly from vacation this week and not spoken publicly on Greece or other matters since Seibert confirmed that the chancellor had talked with Tsipras on Monday and Tuesday.
Merkel is scheduled to go to Brazil next week on a state visit. If all goes as planned, the German parliament could be recalled from vacation to vote on the package before she leaves.
© 2015 The New York Times News Service
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